2005- Lager Beer

Net Revenue
COGS
No of Barrels Sold
Price per Barrel
Cost Per Barrel
Unit contribution margin

50,440,000.00
34,803,600.00
520,000.00
97.00
66.93
30.07

Revenue forecast for Light Beer

Year
Light Beer consumption(in
barrels)
CAGR

2005
18,744,303
4.00%

Estimated Growth Rate(YoY)

Estimated Sales (in barrels)
Estimated Revenue @97$ per
barrel
Light Beer
Price
Variable Cost
Unit Contribution Margin

2006
19,494,075

2007
20,273,838

4.00%

4.00%

0.25%

0.50%

48,736

101,370

4,727,392

9,832,890

97.00
71.62
25.38

Break Even Analysis

Initial advertisement Cost
Annual Increment SG&A cost
(2006)
Annual Increment SG&A cost
(2007)
5% Cannibalization Loss(2006)
5% Cannibalization Loss(2007)
Total Fixed Cost
Break Even Volume
Break Even Revenue

750,000.00
900,000.00
900,000.00
766,183.60
750,859.93
4,067,043.53
160,247.00
15,543,959.00

Hence within 2 years it is not possible to break even as the total sales will be less than break even sa
Capital Budgeting
Year
Revenue- Lager
Gross Margin- Lager

2006
49,431,200.00
15,323,672.00

2007
48,442,576.00
15,017,198.56

2008
47,473,724.48
14,716,854.59

Cannibalization Loss @ 5%
Initial advertisement Cost
Incremental SG&A
Total Cost for Light Beer
Light Beer consumption(in
barrels)
CAGR

(766,183.60)
(750,000.00)
(900,000.00)
(2,416,183.60)
19,494,075

(750,859.93)

(735,842.73)

(900,000.00)
(1,650,859.93)

###
(1,635,842.73)

20,273,838

21,084,792

4.00%

4.00%

4.00%

Estimated Growth Rate(YoY)

0.25%

0.50%

0.75%

Estimated Sales (in barrels)

Gross Margin- Light
Net Change in Contribution

48,736
1,236,919.68
(1,179,263.92)

2
3
4
5

($317,972.67)
$1,374,390.89
$3,881,033.89
$7,074,680.81

Year
Year
Year
Year

NPV@12%
NPV@12%
NPV@12%
NPV@12%

101,370
2,572,770.60
921,910.67

158,136
4,013,491.68
2,377,648.95

The above data clearly tells us that within 3 years the new product will be profitable and we should go
with the launch of this new beer.

2008
21,084,792

2009
21,928,183

4.00%

4.00%

0.75%

1.00%

158,136

219,282

15,339,192

21,270,354

less than break even sales

2009
46,524,249.99
14,422,517.50

2010
45,593,764.99
14,134,067.15

(721,125.87)

(706,703.36)

(900,000.00)
(1,621,125.87)

(900,000.00)
(1,606,703.36)

21,928,183

22,805,311

4.00%

4.00%

1.00%

1.25%

219,282
5,565,377.16
3,944,251.29

fitable and we should go ahead

285,067
7,235,000.46
5,628,297.10